Establishing an emergency fund is a critical step in avoiding financial trouble when unexpected events occur. I agree with Dave Ramsey’s suggestion that your first goal should be to get an emergency fund of $1,000, then hang onto it. Next, your goal for an emergency fund should be an amount equal to 3 to 6 months of living expenses – I suggest 6 months.
The good thing about establishing an emergency fund is that you can do it in steps. How you do it is up to you, but it often entails doing something other than putting in some overtime at your job. Nearly every time I suggest to a client that they establish an emergency fund, they tell me that they can’t get any more hours at work. The answer is to find a different way to get some money.
A common solution is to mow some lawns on the side. Another idea is to go to a neighborhood and offer to paint their address on the curb so that EMS/Fire/Police can locate your address easier in the event of an emergency. You could charge $10 to $20 per house and do a few per block of houses that solicit.
I’ve been suggesting that to clients for years; then one Saturday I was taking a nap on the couch and I heard my wife answer the door. Then I heard her giving the kid at the door $20. When I asked what that was for, she said it was to pay the kid for painting our address on our curb. When I went to go look at the curb, I noticed that two of my neighbors had him do the same thing for them! That was a quick $60!
Another idea that I often suggest to client is an idea that was given to me by Elvira, a 58-year-old caretaker for my mother when she was on hospice care. We knew the end of my mother’s 10-year struggle with COPD was near, and I asked Elvira to hold open a door so that I could move a small bookcase into the garage. Elvira asked me what I was going to do with that bookcase, and I told her I was going to get rid of it. At that point, she offered to take it so that it would be out of the way sooner. I agreed and gave her another small bookcase to take.
When I saw Elvira the next week, she thanked me again for those two items I gave her, and she told me that she got $2,000 from a garage sale. I was amazed, so I asked her what else she sold. She said that she would go through areas of town that were scheduled for bulk-collection and she would stop at houses that had some broken furniture set by the street for collection. She would ask the owners if they would mind if she took those items or if they would rather that it stay there until their bulk collection day arrived. Each owner agreed that she could have the stuff. She then took that stuff home, repaired it, and then held onto it until she had her next garage sale.
Two weeks after that, Elvira told me that she had another garage sale and made $1,500. So, that’s $3,500 in 3 weeks! Of course, it took her a couple of months to gather enough stuff to have a garage sale, but how many times would you have to do something like that to get 6 months of living expenses set aside for emergencies? I’ve shared that story with hundreds of clients, and one client came back to tell me that he was inspired by that story. He said that if a lady nearly 60 could do it, then he could do it, too. He did, and he made $1,200 at his garage sale.
